Australia's High Court rules on ISP's liability for user infringements

Author: Rebecca Giblin (Lecturer, Monash Law School, Australia)

Roadshow Films Pty Ltd v iiNet Ltd [2012] HCA 16, 20 April 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps095, first published online: June 22, 2012

Australia's secondary liability law has long been broader than that of equivalent jurisdictions, but it was recently reined back when its highest court ruled that ISP iiNet was not liable for authorizing its users' copyright infringements.

Legal context

In 2009, 34 television and movie companies instituted litigation against iiNet, then Australia's third largest ISP, arguing that it had ‘authorized’ the copyright infringements of its subscribers.

Authorization liability has traditionally accrued under Australian law where a defendant has ‘sanctioned, approved or countenanced’ third-party infringement. Since a partial codification of the law was enacted in 2000, courts have also been obliged to consider:

• the extent (if any) of the defendant's power to prevent the doing of the infringement; 

• the nature of any relationship between the defendant and the infringer; and 

• whether the defendant took any reasonable steps to prevent the infringement, including whether they complied with any relevant industry codes of practice.

In the absence of any compelling ‘smoking guns’ to demonstrate that iiNet had actively encouraged infringement, the applicants' argument focused on its inactivity. Like other Australian ISPs, iiNet received thousands of notices each week alleging infringement by its subscribers, from organizations such as the Australian Federation Against Copyright Theft (‘AFACT’). The applicants argued that passing these notices on to customers and then terminating their access if further allegations were made would have been a ‘reasonable step to prevent infringement’, and that iiNet's failure to do so at least indicated that it ‘countenanced’ those infringements. This would have been a stretch even for a law that was already considerably broader than its equivalents in Canada, the USA and the UK.

Facts

At first instance, the trial judge found in favour of iiNet. Given its lack of power over the BitTorrent file-sharing technology which facilitated the infringements, Cowdroy J found that it could not ‘be incumbent on the respondent to stop the infringements’. On appeal, a majority of the three-judge Full Federal Court reached the same conclusion—but in a manner markedly less favourable to iiNet.

Jagot J, dissenting, held that iiNet had already authorized its users' infringements. She was particularly influenced by iiNet's unwillingness to negotiate with rightholders (even in the absence of any judicial authority suggesting it was obliged to do so) and by a press release it issued and made available via BitTorrent the day the litigation was instituted against it, stating its view that it was not obliged to disconnect phone lines based on unproven allegations. In these circumstances she found that it had ‘at least countenanced’ its subscribers' infringements.

Referring to iiNet's ‘contumelious disregard’ for the rights of copyright owners, Emmett J appeared inclined to reach the same conclusion. Ultimately, however, he decided that the notices were simply too flawed for iiNet's failure to act upon them to be unreasonable. Nonetheless, he went on create a ‘roadmap’ for the future: where rightholders had provided sufficient evidence of infringement, undertaken to reimburse the ISP for the reasonable cost of verifying infringement allegations and indemnified it in respect of liability for any mistaken terminations, and where the ISP has still not passed allegations of infringement to its subscribers (and suspended or terminated their access as appropriate), they may well be liable for authorization. Nicholas J had more sympathy for iiNet than his colleagues, but he too left the door open to future ISPs being held liable for similar conduct.

The consensus among academics and practitioners was that this judgment effectively created an unprecedented common law graduated response regime that sharply tilted the playing field in favour of rightholders. In a surprising move however, the applicants looked the gift horse in the mouth and made an ultimate appeal to the High Court.

The strategy backfired. In two separate opinions, the High Court unanimously held that iiNet had not authorized its users' infringements. In the process, it reined back what proved to be an overly-expansive interpretation of the law by the Full Federal Court.

Analysis

This decision considerably reduces the breadth of the Australian authorization law and makes it less attractive to major rightholders as a vehicle for obtaining expansive precedents useful for pushing their enforcement agendas abroad.

Both opinions indicate that ‘countenancing’ can have a broader meaning than ‘authorizing’, finally bringing the Australian view on this point in line with longstanding UK and Canadian authorities. Indeed, the French opinion downplayed the significance of ‘sanctioning and approving’ as well, saying that attention must first be given to the statutory factors rather than the old common law definition.

Applying the statutory factors, French, Crennan and Kiefel CJJ (in ‘the French opinion’) found that iiNet had no technical power to prevent primary infringement since it had no involvement with the BitTorrent technology or power to control or alter it, and because it did not host infringing material or sites that linked to torrent files associated with infringing content. It only had an indirect power to prevent primary infringement by terminating its contractual relationship with subscribers. The notices issued by AFACT ‘did not provide iiNet with a reasonable basis for sending warning notices’ threatening suspension or termination of subscriber accounts. Accordingly, its failure to do so did not amount to authorization of any primary infringement.

The reasoning of Gummow and Hayne JJ (in ‘the Gummow opinion’) was similar. They found that the ‘only disputably practical course of action’ was for iiNet to terminate user accounts after allegations of infringement. This, however, was not a reasonable step, since it would also prevent subscribers from taking advantage of non-infringing internet uses. And, in the absence of any industry code, there was nothing stopping disconnected users from signing up to another ISP and continuing as before, so it was unlikely to bring about any significant reduction of infringement. The Gummow opinion found that it was simply ‘too long a march’ from ‘indifference’, to ‘countenancing’, and so to ‘authorization’.

Practical significance

This decision certainly does not mean that an ISP can never be liable for authorization under Australian law. Indeed, in Cooper v Universal Music Australia [2006] FCAFC 187 an ISP was held liable for its direct involvement with a subscriber's website which was set up to provide links to infringing mp3s of popular songs. If an Australian ISP similarly encouraged or engaged in active involvement with its users' infringements, it certainly could and should be held secondarily liable for doing so. However, the decision does give ISPs some welcome certainty as to their rights and obligations. ISPs will not be liable for opting not to pass on infringement notices to subscribers when they have no involvement in the infringements or any effective power to prevent them.

The court acknowledged the problems copyright owners face as a result of widespread infringement, but made it clear that the common law is not an appropriate source of a graduated response law. This was the correct decision and consistent with the approach taken in other jurisdictions. Given the complexities involved, particularly the costs of enforcement, the need for appropriate safeguards and the potential impact of such a regime on individual consumers, the proper place for development of a graduated response law (if any) is the legislature.

A principle of general application?

Author: Darren Smyth (EIP, London)

Regeneron Pharmaceuticals Inc v Genentech Inc [2012] EWHC 657 (Pat), Patents Court, England and Wales, 22 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps087, first published online: June 19, 2012

The Patents Court, England and Wales, has upheld the validity of a claim expressed in broad functional terms and, in relation to sufficiency, has, unusually, considered that the invention relates to a ‘principle of general application’ as set out by the House of Lords in Biogen Inc v Medeva plc [1997] RPC 49.

Legal context

In European patent law, there is no specific prohibition on claiming an invention in broad terms. The closest legal provision, that the claims must be ‘supported by the description’ (Article 84 of the European Patent Convention, EPC) is not a ground of invalidity of a patent. However, a claim that is expressed in broad terms will frequently be found either to lack inventive step (because it encompasses obvious subject matter) or to be insufficient.

The requirement for sufficiency is expressed in Article 83 EPC: ‘The European patent application shall disclose the invention in a manner sufficiently clear and complete for it to be carried out by a person skilled in the art.’ Within this broad requirement, UK jurisprudence has established three ways in which insufficiency can arise: classical insufficiency, ‘Biogen insufficiency’ or insufficiency by excessive claim breadth, and insufficiency by ambiguity.

In Biogen the leading judgment stated: ‘If the invention discloses a principle capable of general application, the claims may be in correspondingly general terms’. Therefore, the criterion to be satisfied for a claim which is framed in broad terms to be found sufficient according to Biogen is that it involves ‘a principle capable of general application’.

Accordingly, patentees frequently argue that their invention discloses a principle capable of general application, but cases where this has been accepted are rare. It was recently acknowledged in H. Lundbeck A/S v Norpharma SpA [2011] EWHC 907 (Pat), where the following claim was held not to be insufficient (although the patent was held invalid on other grounds): A process for the synthesis of citalopram, in which a process for the synthesis of [intermediate] according to claim 1 is contained. However, in that case, the part of the claim that was expressed broadly was that part that was peripheral to the actual invention.

Facts

The Genentech patent at issue is EP 1238986 and relates to VEGF. VEGF was known at the priority date as one of a number of angiogenic growth factors (others included FGF, PD-ECGF, EGF, TGF-ß, TNF-α, angiogenin and angiotropin). Because angiogenesis (or neo-vascularisation—the process of new blood vessel growth by outgrowth from pre-existing vessels) is implicated in a large number of diseases, including cancer, rheumatoid arthritis, macular degeneration, and atherosclerosis, a growth factor whose activity could be targeted to control angiogenesis would have been therapeutically highly desirable. However, it was not known that VEGF was such a growth factor.

The main claim of the patent was in the following terms:

Use of a hVEGF antagonist in the preparation of a medicament for the treatment of a non-neoplastic disease or disorder characterised by undesirable excessive neovascularisation, wherein the hVEGF antagonist is:

(a) an anti-VEGF antibody or antibody fragment;

(b) an anti-VEGF receptor antibody or antibody fragment; or

(c) an isolated hVEGF receptor.

Regeneron and Bayer sought revocation of the patent, and also a declaration that a product to be marketed by Regeneron under licence from Bayer called VEGF Trap Eye (VTE) did not infringe.

VTE was found to infringe the patent on the basis that it satisfied the definition of (c) in the claim, even though it did not include the whole of the hVEGF receptor sequence.

The claim was found to involve an inventive step over the pleaded closest prior art, a paper entitled ‘The vascular endothelial growth factor proteins: identification of biologically relevant regions by neutralizing monoclonal antibodies’, which disclosed an anti-VEGF antibody (ie an antibody satisfying the definition of (a) of the claim). The judge accepted that, although the paper stated that the antibody ‘may have therapeutic potential’, it did not render it obvious to use anti-VEGF antibodies in therapy, because of ‘the fact that VEGF was only one of many factors and other agents which could be investigated, the commonly accepted view that there was no single factor responsible, the confusing picture presented by the common general knowledge and the view that achieving anti-angiogenesis therapy would be difficult’.

The judge acknowledged secondary indicia of non-obviousness, including a prestigious award given to one of the inventors, and other accolades in the literature.

A number of insufficiency attacks were made on the patent, and the judge rejected them all. On the matter of Biogen insufficiency, the judgment states:

I consider that the patent discloses a principle of general application within the meaning of the authorities insofar as it claims anti-VEGF antagonism as a treatment for all non-neoplastic diseases. The tumour data in the patent establish that VEGF blockade is likely to be a successful strategy for treatment in cancer. The skilled reader would appreciate that the reason it is likely to be successful is because blocking VEGF is a sufficient intervention to prevent angiogenesis, at least in models of cancer. It is common ground that it is possible to extrapolate that reasoning to at least some non-neoplastic diseases.

Thus the judge placed the invention squarely within the situation where, according to Biogen, it can be claimed in broad terms.

The judge rejected sufficiency attacks based on the time and effort that would be necessary to develop treatments according to the claims, in particular the definition in (c) of the claim, not least VTE itself which was accepted to be ‘very clever’. In this regard, the judgment states:

The fact that a claim may extend to further inventions which make use of the principle disclosed in a patent does not necessarily render the patent insufficient. I do not consider that the fact that the claim extends to VTE makes the present patent insufficient, even in the light of the evidence which I have accepted. Finally, therefore, the judge concluded: ‘The patent is not invalid on any ground alleged. The patent is infringed by VEGF Trap Eye.’

Analysis

Biogen insufficiency in UK jurisprudence relating to broad claims is mirrored by EPO jurisprudence which, however, generally considers the matter as an issue of inventive step. The leading case is AGREVO/T 939/92 according to which, if the technical problem is not solved across the breadth of the claim, the claim lacks inventive step. Lack of inventive step according to AGREVO was separately pleaded, but the judge understandably stated that ‘in the present case this argument traverses the identical ground to that raised by insufficiency’, and so dealt with it accordingly under the insufficiency heading.

Whether expressed as a matter of inventive step or insufficiency, both approaches are intended, in their way, to ensure that the monopoly granted by the patent is commensurate with the contribution to the art. This is still a precept of patent law in Europe.

‘Fair basis’ (that the claims must be fairly based on the description) was a requirement of the Patents Act 1949 in the UK, and is still a requirement in, for example, Australia, but does not survive in that form in current European patent law. Moreover, ‘support’ (that the claims be supported by the description) is not a ground of opposition or revocation. Nevertheless, jurisprudence has been developed in Europe under the current law in relation to inventive step and sufficiency to maintain the balance between contribution to the art and the scope of allowable claim.

In the present case, the claim was unusually broadly defined in that both of the key features were defined in broad functional terms—the medical indication (any disease other than cancer in which undesirable excessive blood vessel growth occurs) and the treatment agent (any antibody or fragment against VEGF or a VEGF receptor, or a VEGF receptor [or, as construed by the judge, part thereof]). Further, VEGF was, as such, already known as an angiogenic growth factor at the priority date of the patent: what was unknown was that VEGF is necessary for pathological angiogenesis, and therefore it was not known what would be the therapeutic effect, if any, of a VEGF antagonist. This might therefore have seemed an unpromising case to successfully argue sufficiency under the Biogen jurisprudence.

The decision rests on a number of findings, key among which are the following: that the patent disclosed a principle of general application; that it was reasonable at the time to predict that anti-VEGF therapy would be effective in relation to non-neoplastic diseases generally; and that allegations of classical insufficiency that specific diseases could not be treated as claimed were not made out. In relation to the ability to make the claimed antagonists, there was no real attack in relation to the antibodies defined in (a) and (b) of the claim, and the objection in relation to the receptor defined in (c) of the claim was only in relation to an antagonist with less than the full extracellular domain of the VEGF receptor. This objection was rejected on the basis that in this industry ‘careful experimentation with a degree of trial and error, sometimes extending over months and years, is entirely normal’, and because:

A patent is not insufficient because it may take much work to develop the most elegant or refined embodiment of its inventive concept. If one were to carry on with the refinement, one would still be making use of the principle disclosed in the patent, working towards an improved embodiment of it.

Practical significance

Because the UK courts since Biogen have so rarely acknowledged that an invention involves a principle of general application, practitioners may have come to believe that such cases would be purely theoretical. This decision should give assurance that in appropriate cases broad protection can be validly obtained.

Prometheus fails to steal fire from the Gods

Author: Jonathan Moss (Hogarth Chambers)

Mayo Collaborative Services v Prometheus Laboratories (US Supreme Court), 566 U.S. __ (2012), 20 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps086, first published online: June 15, 2012

The US Supreme Court has held that a medical process involving the determination of metabolite levels in relation to the toxicity or efficacy of a drug is unpatentable on the grounds that it amounts to patenting a law of nature.

Legal context

Under section 101 of the US Patent Act, ‘whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent’. This positive definition of what constitutes patentable subject matter differs from the position in Europe, where art 52 of the EPC defines patentability in the negative.

Nevertheless, the US Supreme Court has previously decided that ‘laws of nature, natural phenomena, and abstract ideas’ are non-patentable subject matter under s 101. To move an invention from being classed as a law of nature into patent-eligible subject matter, the patent must limit its reach to a particular inventive application of the law. The US Supreme Court visited this dividing line in this case in relation to medical diagnostics.

Facts

Prometheus is the sole and exclusive licensee of the two patents at issue. These patents cover the use of thiopurine drugs to treat certain autoimmune diseases. The problem to which the patent is addressed is that different people metabolize thiopurine to different extents. Thus, depending on this rate of metabolization, the provision of further doses to a patient may have an effect ranging from being too low and therefore having no medical effect, to too high which can be toxic.

The patents claimed a set of processes by which a doctor (1) administered the drug, (2) determined the metabolite levels in the blood, and (3) a ‘wherein’ step which described the likely effects of a dose and respectively indicated a need to increase or decrease the dosage.

The District Court at first instance held that the patent was invalid on the grounds that the processes claimed were natural laws or phenomena, ie the correlations between thiopurine metabolite levels and the toxicity/efficacy of thiopurine drugs. The Court of Appeals for the Federal Circuit (CAFC) reversed this decision, essentially on the grounds that, by limiting the application to use in and on the human body, the patent claims were confined to definite bounds and thus in compliance with section 101.

The CAFC based this decision on the ‘machine or transformation test’. The Supreme Court had recently held in Bilski that the ‘machine or transformation test’ was not a definitive test for patent eligibility and after Bilski had remanded the Prometheus case for reconsideration. The CAFC reaffirmed its earlier decision.

Analysis

The decision of the Supreme Court was unanimous (9–0), with the opinion of the court being written by Justice Breyer. The court regarded the key question as being ‘whether the claims do significantly more than simply describe these natural relations’.

Having held that the relationship between thiopurine metabolite levels and the likelihood that it either causes harm or is medically beneficial was merely a natural phenomenon or law, the court proceeded to find that the additional features did not stop the claims from monopolizing a law of nature. The court viewed the discovery of this metabolic relationship as akin to Newton's laws of gravity or E = mc2.

The court stated that ‘the steps in the claimed processes (apart from the natural laws themselves) involve well-understood, routine, conventional activity engaged in by researchers in the field’. While this conclusion is not controversial, it appears that, in coming to its conclusion under s 101, the court factored in questions of obviousness and novelty. Such questions are arguably not relevant under s 101 because they are addressed by other provisions of the Patent Act (eg, s 103 deals with obviousness). Even though the court made heavy reference to its previously decided case law, the court did not rely on legal analysis alone. A facet of US Supreme Court jurisprudence is that the court often makes recourse to wider policy issues, and in this case the court relied on the underlying justification for the granting of patent monopolies. The court recognized that rewarding those who discover ‘new’ laws of nature might encourage people to discover them in the first place. However, the court also recognized the flip side of this, which is that scientific laws and principles are the ‘basic tools’ of scientific research, meaning that future research might be inhibited if a patent is granted.

Practical significance

The case has caused a stir among certain parts of the medical research and patent communities on the ground that it appears that diagnostic medicine treatments are now going to be inherently difficult to patent. Indeed, by comparing medical drug relationships (which differ from person to person) to overarching laws of science (such as the laws of gravity which have the same effect on everybody), the court has failed to make clear where exactly the line between law of nature and medical scientific advancement is to be drawn. This leads to considerable uncertainty over similar medical advancements as, in the medical field, a new ‘discovery’ is often the very thing that ends up being embodied in a patent and subsequently put in a drug. Questions therefore arise as to what extent this area of the medical market is now going to be protected by patent law. Significantly, this case may finally preclude any chance of patenting DNA or gene sequences.

While the court could arguably be criticized for bringing in questions of obviousness to patent eligibility, this criticism can be counterbalanced by the court considering the larger picture of scientific advancement in the field being potentially inhibited. This broader consideration of the impact of the decision is to be welcomed, as it is often a factor that can get overlooked when a strict statute and case law analysis is followed. Whether they got the answer to this question of inhibition in the relevant field correct is another matter.

As an increasing number of patent cases have reached the US Supreme Court in recent years, these decisions, along with the recent US patent legislation, mean that US patent law is undergoing a significant shift. Following this decision it appears that the US will no longer be as permissive in the granting of patents as it once was. As the US is arguably the world's leading centre for scientific innovation, changes in policy in the US will certainly have an impact on companies all around the world.

Another issue arising out of this case, which is relevant for European patent lawyers and attorneys, is the difference of opinion between the CAFC and the Supreme Court. The CAFC has special jurisdiction to hear patent cases in the US, and a number of the judges on it are specialist patent judges. This has led some commentators to complain that, because of their lack of relevant experience, the Supreme Court should defer more often to those courts with specialist patent backgrounds. Such a call will almost certainly be ignored, but it does demonstrate the tensions that can arise if the European system moves towards allowing the Court of Justice of the European Union to hear patent cases.

July JIPLP: an Africa-oriented editorial

Although June is still a relatively young month, the online version of the July issue of the Journal of Intellectual Property Law & Practice (JIPLP) is already available to subscribers. The contents page for this issue can be checked out here, by subscribers and non-subscribers alike. And here's a reminder: even if you aren't a subscriber, you can purchase short-term online access to articles, current intelligence notes and reviews. This month's editorial looks at Africa, and in particular at the question whether the African IP professions are wise and mature enough to be able to decide for themselves what their shared interests are.

"IP in Africa: who controls the agenda?

Depending on how you count them, Africa has somewhere in the region of 60 countries. The continent is by no means homogeneous, whether measured by political, geographical, religious or industrial criteria, but its wildly differing jurisdictions share one common characteristic: they are not regarded as being sufficiently responsible to determine what is in their best interests in terms of intellectual property.

A year ago, following the elimination of an African Regional Session at the massively popular and highly influential International Trademark Association (INTA) Meeting in San Francisco, a group of African practitioners met and determined that it would be a valuable exercise to come together as Africans and share their experiences in dealing with IP problems that were common to them: fighting counterfeits in court, encouraging and protecting investment in innovation and technology transfer, seizures and border measures, the gulf between relatively modern substantive laws and antiquated procedural rules—these and more were to be reflected in their agenda.

Following a commendable degree of thought and planning, as well as the securing of funds from various sources to support their endeavour, an impressive programme was put together. The proposed speakers were African, as were the topics. This event, scheduled for April 2012, never took place. Following the proposal of a counter-programme, based on the so-called development agenda, the South African government withdrew its support, the venue was lost and, with it, the chance for African IP practitioners to exercise their right to come together as responsible professionals and share their expertise.

Writing at a distance from the events leading up to the cancellation of the African IP forum, but having seen both sets of programmes, I find it easy to see why African practitioners at this year's INTA Meeting came together to express so much anger and frustration. It appears as though they are not considered sufficiently mature to recognize the importance of IP in Africa, or even to form their own conclusions regarding the functions which IP rights can perform within a developing continent. It is frankly insulting to expect qualified practitioners to be made to sit and listen for three days to the importance of exceptions and defences to IP infringement where it is scarcely possible in many cases to achieve any degree of enforcement at all. It is embarrassing to expect them to listen to an audience of theoreticians from the developed world pour out their patronizing patter on the dangers of IP and its threat to traditional practices and values.

Africa is not a basket case. The continent consists of more than deserts, safari parks and colourfully-robed chieftains and painted dancers waiting to be told by NGOs what they must do and how to ask to be paid when pharmaceutical companies use the secrets of their leaves. Africa is the continent of Nollywood, of a vibrant and creative music industry, the home of prize-winning literary talent and of the branding and licensing of some of the world's finest coffees.

This is not to say that there is no place for a development debate. WIPO's development agenda is more subtle and many-faceted than many of its critics are prepared to concede. But an African IP practitioners’ forum is simply not the place for that debate. Imagine if the members of practitioner-driven organizations outside Africa, such as the AIPLA, ECTA, CIPA or GRUR, seeking to share their technical solutions to legal problems, were told by outsiders that they were mistaken to do so and that they should be concentrating instead on broader policy issues. Would they not be confused, surprised and possibly even outraged?

Within Africa there is a resolve to try again and, ideally with the benefit of more consultation and better communication between members of the practitioner community regarding its content and function, to present a refreshed version of this year's lost programme. This journal hopes fervently that its organizers will succeed".

News from a sister publication

While JIPLP focuses primarily on intellectual property and practice, that discipline shades into other areas of law and practice -- and the broad interests and versatility of JIPLP's editorial board members reflect this. A first-rate example can be found in Christopher Stothers (Arnold & Porter), a founder-member of the JIPLP editorial board and also a contributor to a sister publication, the Journal of European Competition Law & Practice (JECLAP), which reflects his deep and continuing interest in competition issues. Issue 3 for 2012 contains his freshly-published note, "Copyright Owners Cannot Require Satellite Broadcasters to Impose Territorial Restrictions on the Use of Decoder Cards", this being a note on Football Association Premier League v QC Leisure/Karen Murphy v Media Protection Services, ECJ Joined Cases C-403/08 and C-429/08, 4 October 2011. The abstract reads as follows:

The Grand Chamber of the European Court of Justice has held that it is anticompetitive for the Football Association Premier League (FAPL), when licensing the broadcasting of football matches by satellite, to require its licensees not to supply decoder cards so as to enable access to the broadcasts in EU Member States outside their exclusive territories.

Details of JIPLP's own case note on the same topic, authored by a five-person team from Herbert Smith, can be found here, and Enrico Bonadio's analysis of the Advocate General's Opinion in the same reference can be read in full here.

Pre-filing disclosure of an invention is found to be in breach of equitable doctrine of confidence

Author: Saadat Nisar (Calleja Consulting Limited)

Threeway Pressings Ltd, UK Intellectual Property Office, BL O/124/12, 20 March 2012

Journal of Intellectual Property Law & Practice (2012), doi: 10.1093/jiplp/jps083, first published online: May 25, 2012

The disclosure of an invention did not constitute prior art and should be disregarded when it was made in breach of confidence within the six-month grace period up to the date of filing of the patent application.

Legal context

Broadly, this case raised three questions. First, was there an implied confidentiality agreement between the company and one of its directors who disclosed the invention before filing the patent application? Secondly, could this disclosure be deemed sufficient to anticipate the invention? Thirdly, could the disclosure be disregarded, based on the equitable doctrine of confidence?

Facts

Philip Stanley, Richard Perry, Paul Watkins and William Ford formed a company in 2006 for the design and development of an invention, an ‘Evacuation chair’, which envisaged a dual purpose arrangement for transporting a person downstairs. The product was to be manufactured by Threeway Pressings Ltd (‘TPL’). TPL applied for a patent for this invention. Ford, who was a TPL director, submitted observations under Section 21 of the UK Patents Act 1977. He alleged that, about two months before the filing of the application, the invention was disclosed to, among others, Staffordshire County Council in a meeting on 15 March 2007. As such, it lacked novelty and was not therefore patentable. Mark Crosby, the former Principal Access Officer for Staffordshire County Council filed observations supporting Ford's claim. Ford also initiated but withdrew proceedings under Section 8 of the Patents Act, claiming entitlement to the application as the true inventor.

TPL contended that there was an implied agreement that Ford would keep the invention confidential before the filing of the patent application. It placed reliance in this context on a declaration made by Stanley, indicating that the reason for non-signing of a non-disclosure agreement was the lack of agreement on financial matters rather than on the issue of confidentiality. In the same declaration, Stanley mentioned that Stanley, Ford and Watkins had all considered the issue of confidentiality for the project. There were also statements by Chadwick, Perry and Stanley on the record of the entitlement proceedings showing the existence of an implied non-disclosure agreement between Ford and TPL.

Unconvinced, the IPO examiner construed Stanley's statements to mean that, once the invention was in a suitable form to be presented to customers, this could be done without breaching confidence. According to the examiner, since Ford presented it in a sales meeting, it implied that the invention was suitable to be presented and entailed no requirement of maintaining confidentiality. Moreover, there was no evidence to suggest that Ford had agreed to keep the invention confidential before filing the patent application, or that any such arrangement was ever discussed with him. Further, the examiner observed that TPL was likely to have the knowledge of the meeting of 15 March 2007 as it provided diagrams and photographs of the invention to Ford and made no effort to prevent him from making the alleged disclosure. Accordingly, the examiner rejected TPL's case that there existed an implied non-disclosure agreement between the parties, finding the invention to be anticipated and therefore invalid for lack of novelty. TPL challenged this decision before the hearing officer, but declined a formal hearing and the matter was decided on paper.

Analysis

The hearing officer held on the evidence that the alleged disclosure took place. He noted that Ford had full knowledge of the invention (as accepted by TPL in one of its letters) and that the drawings supplied by Crosby were very similar to those forming part of the application. He also noted that the disclosure took place in a sales meeting, implying that it should be deemed sufficient on the balance of probabilities to anticipate the invention. Further, in the absence of a signed agreement and with no evidence to suggest that the terms of the agreement were agreed in any other way, the hearing officer concluded that the contractual obligation of confidence had not been breached.

The hearing officer, however, viewed the matter through another angle. He invoked the equitable doctrine of confidence in this case, under which an obligation of confidence may exist in certain circumstances, even though there is no contractual relationship between the parties. Referring to an earlier case (Coco v A N Clark (Engineers) Ltd [1969] RPC 41), he noted that the three elements necessary to establish breach of confidence under the doctrine are: (a) the information must have the necessary quality of confidence about it; (b) the information must be imparted in circumstances that attract an obligation of confidence; and (c) there must be an unauthorized use of that information to the detriment of the party communicating it.

The information in this case pertained to an invention and its disclosure before filing of the patent application could not only invalidate the application, but also allow someone else to apply for the patent. As such, the hearing officer found that the disclosed information possessed the necessary quality of confidence about it and first element of the doctrine was satisfied.

The hearing officer also observed that, at the time when Ford and his associates possessed information about the invention, they were likely to be fully aware that its disclosure, prior to the filing of a patent application, would harm the interest of a prospective applicant. This gave rise to an implied obligation of confidence upon Ford and his associates in accordance with the second element of the doctrine. In this regard, the hearing officer also considered a letter from Ford stating that he and Watkins were led to believe that a patent would be filed in January 2007, which prompted them to discuss the invention with potential clients and suppliers in February 2007. In the hearing officer's opinion, this submission lacked merit as Ford and the others should have acted diligently to ensure that the application had actually been filed before making the alleged disclosure. He explained that their belief that the application had been filed in January 2007 was not enough to discharge them from the obligation of confidence.

The hearing officer found that it was obvious to Ford and his associates that the disclosure, if made before the filing of the patent application, would prevent the applicant/inventor from obtaining the patent. In his view, this was sufficient to prove the third element of the doctrine.

Consequently, Ford was held to be under an equitable obligation not to disclose the invention prior to the filing of the patent application, which he breached. As the disclosure took place within the six months period immediately preceding the date of filing of the application, the hearing officer held that it should be disregarded under Section 2(4) of the Patents Act. As such, the invention was not found to be lacking novelty. With these observations, the case was remitted to the examiner.

Practical significance

The decision made it clear that, in the case of a confidentiality agreement, its scope and whether it was breached is determined by the law of contract. However, in the absence of a confidentiality agreement, a party may still be under an equitable obligation to maintain confidentiality in certain circumstances. The hearing officer found that someone possessing information constituting details of an invention, knowing that a patent could be obtained in respect thereof, would automatically be under an equitable obligation not to disclose it till after the filing of the patent application. The real effect of this decision is that in all patent matters where the parties lack any express or implied non-disclosure agreement, it would still be possible to argue that the invention was disclosed in breach of confidence. As such, it would be possible to disregard the disclosure in view of Section 2(4) of the Patents Act, provided that it was made in the six-month period immediately before the date of filing of the patent application. Thus this decision would facilitate patent applicants in meeting the novelty requirement.

Congratulations to a distinguished contributor

Over the past few years, readers of the Journal of Intellectual Property Law & Practice have often had the opportunity to appreciate the talents and the energy of Eddy Ventose, whom the jiplp weblog profiled back in 2010.

The journal has just learned that Eddy has been promoted to Professor in the Faculty of Law, in the University of the West Indies (UWI) Cave Hill Campus, with immediate effect. This makes Eddy -- at 35 years of age --  the youngest person ever promoted to a personal professorship in UWI's history (and incidentally in the shortest period of time from start to finish).

JIPLP is delighted to share this news with its readers and wishes Eddy all good fortune in his new status as Professor of Intellectual Property and Public Law. Eddy's promotion is also welcome recognition for the respect in which JIPLP is held, since it is in this journal that so much of Eddy's outstanding publishing record has been established.

Some bits and pieces

First, a quick reminder for subscribers to the printed version of JIPLP: the June 2012 issue (contents here) has already been dispatched and should be with you by now, all things being equal.

Secondly, if you are submitting material for publication in JIPLP, can I strongly encourage you to take a look at least one recent issue before doing so, and to consult the Contributor Guidelines. It will save someone a lot of work at a later stage -- and that someone may well be you!  In particular

• JIPLP notes on cases, statutes and other recent development, which we call Current Intelligence notes, must be submitted in accordance with the template which has been in use since the journal was launched in 2005.  We regret that this template is so widely unpopular with authors -- but it is extremely popular with readers. If you want to please yourself rather than your readers, there are other journals out there which may be delighted to publish it, but we put our readers' interests first since we exist for them, not vice versa.
  
• Footnotes are for references, not for cut-and-pasted extracts from your own or someone else's research. Also, they really do belong at the foot of the page. JIPLP doesn't do bibliographical lists of references at the end of each article. What's more, since footnotes are for specific guidance of readers, if you're citing a book -- particularly if it's a multi-volume work -- please let us know which volume you are referring to and which page or paragraph.
  
• Each article has a title and is likely to contain headings, sometimes subheadings and very rarely anything of a lower order than that.  We do not number paragraphs and their subdivisions, so references such as "see paragraph 3.4.ix(b).IV above" and suchlike have no place in a JIPLP article.
  
• Before you garnish your submitted piece with italicised quotes, underlined headings, italicised bold Gothic text and so on, bear in mind that someone has to take them all out again before the piece goes for setting.  This takes time and effort and has to be paid for. 

Thanks so much for your cooperation!

I may have driven a BEETLE motor car: but I won't be using a BEATLE wheelchair!

Author: Sally Cooper (Trade Mark Attorney)

You-Q BV v OHIM with Apple Corps Ltd intervening, Case T-369/10, General Court (Eighth Court), 29 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps076, first published online: May 15, 2012

Does your mark have an enormous reputation (emphasis supplied) stretching over more than 40 years? And would the relevant public (emphasis supplied) be attracted by the very positive image of freedom, youth, and mobility associated with your mark? If so, your mark is THE BEATLES (or just BEATLES) and you have, in the General Court of the European Union, succeeded against a company attempting to register the mark BEATLE by relying on the reputation of your marks.

Legal context

A business seeking to oppose a trade mark application filed at OHIM has a number of grounds on which it can rely, particularly those set out in Article 8 of the Community Trade Mark Regulation 207/2009 under ‘Relative grounds’ which invoke the circumstances where ‘earlier marks’ prevail. For marks with a reputation, Article 8(5) protects against marks on goods identical or similar where (third part of Article 8(5)) ‘… the use without due cause of the [opposed] trade mark would take unfair advantage of, or be detrimental to, the distinctive character or repute of the [opponent's] earlier trade mark’. This judgment is exclusively concerned with the application of Article 8(5).

Facts

Apple Corps Ltd (‘Apple’) was incorporated in 1963 as (according to Wikipedia) a sensible diversion of income arising to the band that came from Liverpool and took the name THE BEATLES. Apple has extensive protection for BEATLES and THE BEATLES as word marks and stylized marks both at OHIM and on Registers of Member States. But none of these registered rights extends to goods in Class 12 (eg ‘Vehicles; apparatus for locomotion by land, air or water; wheelchairs’). So the attempt by a Dutch company to register BEATLE (in the form of a word in a particular font with no additional graphic material) for a list of goods in Class 12 being ‘[wheelchairs/scooters] specially made for [sick and] disabled and other persons requiring assistance’ presented a challenge. Apple went ahead with opposition proceedings, providing details of Registrations (and evidence of use) and also relied on its reputation in BEATLES and in THE BEATLES. The Opposition Division found against Apple: the goods for which the Dutch company wanted to register BEATLE were ‘different’ to the goods of Apple's registrations. The Second Board of Appeal went straight to Article 8(5): it accepted that the goods were different but found for Apple. The court confirms the Decision of the Second Board of Appeal.

Analysis

The court's preliminary observations note the primary function of a trade mark is that of an ‘indication of origin’, adding that a mark acts as a means of conveying messages concerning ‘images and feelings … such as luxury, lifestyle, exclusivity, adventure, youth’. The context of these remarks is the court observing that the parts of Article 8(5) are cumulative (failure to satisfy any one part renders the provision inapplicable) and expanding on the last part (the risk that use of a mark without due cause would take unfair advantage of, or be detrimental to, the distinctive character or repute of the earlier mark). We find ‘image’ returning later in the judgment (see Unfair advantage, below). The court's preliminary observations also emphasize that Article 8(5) protects a mark with a reputation even if the goods of the mark applied for are not similar. The court then analyses Article 8(5).

Reputation

Crucial to the case is previous case law deciding that the reputation of a trade mark must be assessed in relation to the relevant section of the public—which may be either the public at large or a more specialized public (emphasis supplied). The Board of Appeal had found Apple's marks BEATLES and THE BEATLES to have an ‘enormous reputation’ for ‘sound records, video films, films’ and had found the marks enjoying a significant reputation for merchandising products such as toys and games. Moreover (importantly), the Board of Appeal had decided (in this context of ‘existence of reputation’) that the relevant public was the public at large (rather than any more specialised public). Once the court accepts (as it does) the Board's finding that the relevant public is the public at large then it can move on (as it does) to observing that the relevant public overlaps (and encompasses) the more specialized public which is the public concerned with the goods of the mark applied for. The court's conclusion is that the Board of Appeal was entitled to infer that Apple's marks BEATLES and THE BEATLES have a (very substantial) reputation.

Similarity of signs

The court has no difficulty with the Board's finding of the marks being highly similar (visually, phonetically and conceptually). Note is taken of the consumer generally paying greater attention to the beginning of a mark (the ‘s’ at the end of BEATLES and THE BEATLES is not material) and of registration of a word mark protecting the word mentioned (the fact the mark applied for is the word BEATLE in a particular font is not material).

A link between signs at issue

Again, the court refers to previous case law and sets out the need for a certain degree of similarity between the marks (meaning the mark applied for and the earlier marks) by virtue of which the public makes a connection between them, even though it does not confuse them. The court then reviews five factors relevant to such a link:

First, it finds the mark applied for and the earlier marks are highly similar (see above).

Secondly, it accepts the goods are dissimilar but it brings in (see above) that the public at large overlaps (and encompasses) the more specialist public which is the public concerned with the mark applied for.

Thirdly, it finds (see above) that the earlier marks have an enormous reputation.

Fourthly, it finds that the earlier marks have distinctive character.

Fifthly, it sets out that a likelihood of confusion must be taken into consideration (as it satisfies the requirement of a link) but that Article 8(5) does not require the existence of a likelihood of confusion.

The court's conclusion is that there is a link between the marks because the mark applied for and the earlier marks since the mark applied for [BEATLE] will call to mind the earlier marks with a reputation [BEATLES and THE BEATLES] on the part of the relevant public.

Unfair advantage

The court does not upset the Board of Appeal's finding that it had sufficient evidence to demonstrate a serious risk that the mark applied for would take unfair advantage of the repute of Apple's marks (‘free-riding’). This was the basis of the decision of the Board of Appeal. The Board did not examine the separate complaint of detriment to distinctive character (‘dilution’) or repute (‘tarnishment’). The court was clearly impressed by ‘the very positive image’ of Apple's marks (an image of ‘freedom, youth, and mobility’) and it is approval of there being a risk of ‘image transfer’ that underpins the court confirming the Board of Appeal's decision that—while the goods are quite different—the risk of unfair advantage is established.

Existence of due cause

As the Applicant did not succeed in placing before OHIM evidence on due cause, the court confirmed the finding of the Board of Appeal that there was no due cause.

Practical significance

 The court was clearly impressed by the evidence of Apple and the case underscores the importance of preparation and presentation of evidence. Otherwise, it is a case ‘on the edge’ and raises more questions than it provides answers. For example, (a) do we now add to the functions of a trade mark an ‘image function’? (b) The court refers to ‘average consumers’ being the relevant public on the context of determining ‘unfair advantage’—but did it apply this? (c) Will practitioners ever consider ditching evidence on ‘likelihood of confusion’ simply because (as the court observes) it is not a requirement set out in Article 8(5)?

GTI: descriptive or not?

Author: Chris Pett: Dehns Patent and Trade Mark Attorneys, Brighton

Volkswagen AG v OHIM, Case T-63/09, General Court, 21 March 2012

Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps079, first published online: May 9, 2012

In a recent decision, the General Court of the European Union rejected an appeal by Volkswagen AG (‘VW’) against a decision by an Office for Harmonisation in the Internal Market (OHIM) Board of Appeal Board (Decision R 749/2007-2 of 9 December 2008), confirming rejection of an opposition filed by VW against an application by Suzuki Motor Corporation to register the words SWIFT GTi as a Community trade mark for goods in Class 12.

Legal context

The Community Trade Mark Regulation (207/2009) provides that a sign shall not be registered as a Community trade mark where, among other things, it is established that there exists an earlier registered trade mark which is registered for the same or similar goods and where, on account of the similarity of the respective marks, there was a likelihood of confusion.

Facts and analysis

VW filed an opposition based on their German registration dating from September 1995 for the mark GTI alone in Class 12, and a similar International registration effective in 14 other now EU territories dating from June 1999. The relevant goods were for all purposes identical.

Suzuki requested proof of use in a number of the territories and VW did provide some evidence. The sufficiency of this was contested in argument by Suzuki, as was the likelihood of confusion. Evidence relating to this and the nature of the mark was also filed.

The Opposition Division at OHIM rejected the opposition, saying that the evidence of use submitted was insufficient to establish genuine use. There was no other decision on the merits of the case.

VW appealed, not least because there was also some dispute about the dates of the relevant use period following an administrative glitch when the Suzuki mark was republished after a correction. Further evidence of use was submitted, as was further argument regarding the likelihood of confusion.

Suzuki had filed strong evidence which not only illustrated the descriptive nature of the VW mark but also showed that marks including the letters GTi were in common use as a descriptive element by numerous car manufacturers in various European countries, including Germany, during the 1980s and 1990s, both before and after the German and other registrations for GTI on which VW had relied.

Ignoring some technicalities regarding the territorial extent of some of the prior rights relied on and the dates of the ‘proof of use’ period, the Appeal Board believed the evidence clearly to show the letters GTI to be a form of technical description (the initials for Gran Turismo injection) widely used in the vehicle trade and endowed only, at the very most, with an extremely low degree of distinctiveness in the perception of the average European consumer. There was no evidence on file to support any specific circumstances affecting the German market. At the levels of both car professional and average consumer, the Appeal Board did not think these initials likely to distinguish Volkswagen cars over those of any other manufacturer. Although the word ‘SWIFT’ did have some descriptive character, they took the view (distinguishing over Case C-120/04 Medion AG v Thomson multimedia Sales Germany & Austria (THOMSON LIFE) [2005] ECR I-8551) that the combination ‘SWIFT GTi’ as applied for by Suzuki was unlikely to cause confusion with GTI alone. The Appeal at OHIM was therefore dismissed.

In the General Court, all aspects of OHIM's Appeal Board decision were reviewed at some length. During the Hearing, Volkswagen additionally claimed (for the first time) that the German public associated the letters GTI principally or even exclusively with them, and that no other manufacturers had recently been selling cars bearing the mark GTI in Germany. However, there was no evidence to this effect in the case and it was now too late to admit any (applying Case T-115/03, Samar SpA v OHIM - Grotto (GAS STATION)).

The General Court agreed with all aspects of the OHIM Appeal Board's decision and dismissed VW's appeal.

Practical significance

The fact that other major car manufacturers such as Peugeot and Citroen had registered and used the initials ‘GTI’ as a descriptive combination with their names before VW applied to register them alone was always going to render the mark prima facie weak and this has proved important to the determination of the case thus far. If the GTI mark alone really had become de facto distinctive of VW through use by them in Germany, evidence to this effect should have been provided. It would then have been a most interesting judgment as to whether the distinctiveness acquired outweighed the descriptive element or vice versa. More attempts at enforcement on the part of VW in Germany might also have assisted. As it was, there was only one instance of enforcement and this was brought after the opposition proceedings had started. If Suzuki go ahead and use SWIFT GTi in Germany, will Volkswagen have a go at them?